Pratt & Whitney in F-35 engine deal with Pentagon

February 05, 2013|Reuters

* Process took more than a year * Deal clears way for negotiations on next batch of engines * F-35 is Pentagon's costliest arms purchase

By Andrea Shalal-Esa and Jim Wolf WASHINGTON, Feb 5 (Reuters) - The Pentagon has reached anagreement in principle with United Technologies Corp's Pratt & Whitney unit for the production of 32 engines for afifth batch of radar-evading F-35 fighter planes, both partiesconfirmed Tuesday. Financial details will be announced when the formalcontract is complete, a joint statement said without specifyingwhen this might be. The head of the Pentagon's F-35 program office, LieutenantGeneral Chris Bogdan, cited in the statement declining engineprices and said he appreciated "everyone's commitment to drivecost out of the program." The agreement was reached late last week after a processthat took more than a year, with Pratt agreeing to lower itsprice by about $20 million, a person familiar with the mattertold Reuters earlier this week. The Pentagon awarded Pratt a preliminary contract valued at$1.12 billion for 30 engines in December 2011. Efforts to reacha final deal have been under way since. A total of $9.5 millionwas added to the preliminary contract in August 2012 for twomore engines. The agreement in principle covers 29 engines forinstallation in the F-35's three models plus three spares, thejoint statement said. Pratt drove down the cost of the F-35's engine by more than$1.5 million per unit in 2011 and an additional $1.4 million in2012, Matthew Bates, a company spokesman, said in an emailedstatement. The company also is assuming all risk for any cost overrunsahead of schedule, he said. Britain's Rolls Royce is Pratt's biggestsubcontractor. Lockheed Martin Corp is the fighter'sprime contractor. The government buys the engines separately. Lockheed wrapped up its own deal with the Pentagon inDecember for the fifth batch of jets, which are already underconstruction at the company's Fort Worth, Texas plant. It alsoreached agreement on a preliminary deal for a sixth batch, which Lockheed, the Pentagon's No. 1 supplier by sales, had beenbuilding with its own funds. Pratt is eager to move forward on a deal for the engines topower the sixth batch, Bates said. The agreement in principle includes 22 F135 conventionalpropulsion engines for the Air Force models, three shorttake-off vertical landing engines for the Marine Corps modelsand seven to power the Navy's carrier variant. In addition to the engines, the deal covers engineeringsupport, sustainment and spare parts. The F-35, the Pentagon's costliest arms program, isprojected to cost some $396 billion if the military builds themore than 2,400 planes currently planned over the next twodecades. The F-35 has been co-developed by the United States andeight foreign partners - Britain, Italy, Netherlands, Turkey,Canada, Australia, Denmark, and Norway. In addition, purchasecontracts have been signed by Israel and Japan.